Conforming Home Loans and How It Applies to a Loudoun County Townhouse Purchase

 

Conforming loans are mortgages meeting the approval guidelines of the two largest purchasers of home loans in the country:

• undefined undefinedThe Federal National Mortgage Association (FNMA, or Fannie Mae)
• undefined undefinedFederal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)

Fannie Mae and Freddie Mac set the standards for conventional mortgage loans. These agencies do not make mortgage loans. Instead, they create a market for mortgage lenders to sell loans thus freeing up the capital to lend to other borrowers.

These agencies deem home loan eligibility based on the following factors:

• credit history
• employment stability & income
• adequacy of funds to close
• the property purchased or refinanced
• the type of loan requested

 

The 3 most common types of conventional home loans are:

Fixed-Rate Mortgage – the oldest and most frequently used home loan. A fixed rate loan offers a fixed interest rate that is constant through the life of the loan. This loan can be taken out in 10, 15, 20, and – the most popular – 30-year lengths.

Adjustable Rate Mortgages (ARM’s) – offer a home loan reflective of interest rates that fluctuate and are pegged to one-year Treasury bills or another specific index. The initial rate is low, but grows each year. There’s usually an initial yearly cap of two points, and also a lifetime ceiling cap of around six points. The interest rate can also drop.

Jumbo loans- loans in which the dollar amount is too large to meet the eligibility requirements of either Fannie Mae or Freddie Mac. Currently any loan over $417,000 is considered a jumbo loan (as of January 2006). Generally jumbo loans have the same basic approval requirements as conforming loans.

If you would like an expert to contact you regarding a conventional home loan, simply send and email to conventionalloans@virginiaisfortownhomes.com